Ex-Barclays COO Jerry Del Missier told the UK's Treasury Select Committee that instructions he took away from a conversation between ex-CEO Bob Diamond and the Bank of England's (BoE) Deputy Governor Paul Tucker in October 2008 was not significant at the time and that he took the BoE's role in the episode to be a key reason why the London Interbank Offering Rate (Libor) had to be lowered.
Referring to the file note he was copied in on October 30, one day after Tucker and Diamond had a conversation about the level at which Barclays' Libor submissions stood at, Del Missier said:
"I need to put this into a little bit of context. At the time, the crisis that had been going on for some time had entered severe escalation because of the collapse of Lehman Brothers and this led to unprecedented government intervention," said Del Missier. "The government was injecting money into financial institutions whether they wanted it or not. [Diamond] said that he had a conversation with the BoE [and that] the BoE was getting pressure from Whitehall over [the] health of Barclays because of [high] Libor rates and that we should get Libor rates down."
MPs were quick to ask about whether the event in which Del Missier instructed people to lower rates was deemed as significant, considering his candour over the event.
"There were many, many big events happening at the time. The entire financial system was hanging in the balance and in the grand scheme [of things], it didn't seem a significant event, considering the number of the significant events [happening at the time]. In a week there was a coordinated massive reduction in interest rates that was frankly rendered obsolete by the end of it," said Del Missier.
He added that he did not discuss the situation with Diamond again.
In the memo to Del Missier, Diamond said Mr Tucker had relayed concerns from senior Whitehall figures, over why Barclays' Libor submissions were at the top end.
The memo, which was published on Barclays' website prior to Diamond's TSC hearing, dated 29 October, 2008, read: "Further to our last call, Mr Tucker reiterated that he had received calls from a number of senior figures within Whitehall to question why Barclays was always towards the top end of the Libor pricing. Mr Tucker stated the levels of calls he was receiving from Whitehall were senior and that, while he was certain that we did not need advice that it did not always need to be the case that we appeared as high as we have recently."
While Diamond had said that he was taking the call as a concern over the state of the bank's health at the time and was worried that officials would see Barclays' as having a funding problem, he added that he "did not believe he received an instruction from Paul Tucker or that he gave an instruction to del Missier."
When MPs questioned Del Missier about the aftermath of the memo and conversation, Del Missier admitted that "I took the action on the basis of the phone call. I passed the instruction to head of money markets desk. [When] I relayed the contents of the conversation with Diamond [to the head of the money markets desk] I fully expected that BoEs views would be incorporated in the Libor submissions."
During the first portion of Del Missier's hearing in front of the TSC, he was keen to emphasise that despite the findings from the FSA and the US Department of Justice, he presumed that since the BoE had a direct conversation with Diamond that the regulators would have known and that an instruction was measured.
"At the time, the [Libor] rate was hugely subjective. [It was subjective in the sense that little [lending] activity was going on and since the BoE is responsible for stability of the financial system, expertise and visibility, their views are extremely relevant here. [Lowering the rates at the time] didn't seem an inappropriate action. I base my judgement in the role of the BoE plays in the context of the world was in, Del Missier told the MPs.
According to his hearing, Del Missier also said he did not discuss any Libor lowering actions with ex-Chairman Marcus Agius, or Diamond's predecessor John Varley or the FSA or any Whitehall officials.
He also added he did not discuss any actions with Diamond after the first memo.
In Tucker's TSC testimony last week, he implicated Diamond by saying the [October 29, 2008] call "[wasn't] about Libor. It's about the conduct of their Treasury desk in the money markets apparently paying higher rates of interest. Money markets desks can send out distress flags" and that the memo "gives the wrong impression."
"I think it was... I don't think Bob Diamond did misunderstand. It was not remotely in my mind during this conversation that I could be misinterpreted by Bob Diamond or anybody else. I'm not here to defend Mr Diamond's record," he added.